As a N00B (that’s newbie for those that are not hip to chat slang), I still have a ton of questions, but they are being answered is quick fashion. Since we are in “Tax Season”, my question is…How do you report your income from your sucessfull wholesale deals to the IRS? Is it 1099 income, or do the title company’s/buyers take taxes out of your assignment fee?
Hi Tony, that’s a good question, and I don’t have an answer but I’ll bet Uncle will get his somehow ! ! ! I’m eager to hear the answer to this one !
No one is going to withhold taxes for you.
If you are getting a check paid to you personally for assigning a contract, then ideally (for the investor) the investor who is paying you will want to send you a 1099 at the end of the year because they are going to write off the cost as an expense (although they could capitalize it, I suppose).
There are probably a number of cases where no one will know that you received the income, but I think you’d be taking an undue risk by not claiming the income. Also, in the long run I think you’re better off by showing a tax return with some earnings on it so that you can improve banking/borrowing opportunities, etc. And, um, not to mention that not claiming the income is, um…illegal.
If you sold a property for a profit you need to report that profit and pay capitol gains, which can be up to 35%, or before you sold it apply for a 1031 exchange which allows you to defer paying taxes and you need to actively be looking for a new real estate investment property to roll that profit in to.Look up 1031 on the internet, plenty of info on it.